The impact of financial structure on performance of quoted firms in nigeria
Table Of Contents
Thesis Abstract
Financial structure is financing decision undertaken by a firm in the course of funding its corporate investment. It entails the mixture of debt and equity capital to finance firm’s assets. The impact of financial structure has been inconclusive in literature. It is on the premise of the foregoing that the study sought to examine the impact of financial structure surrogate as short-term debt ratio, long-term debt ratio, stock/shareholders’ fund on performance of quoted firms in Nigeria (measured by return on asset). Panel data were collated from the published financial reports of ten firms over a six-year period ranging between 2011 and 2016. The data were subjected to pooled ordinary least square technique and Hausman tests. The Hausman tests indicated that random-effect model is more appropriate to estimate the four specified models. The results revealed that financial structure represented by short-term debt ratio (β=-0.21; p<0.05); long-term debt ratio (β=-0.33; p<0.05); stock/shareholders’ funds (β=-0.42; p<0.05) and short-term liabilities (β=-0.40; p<0.05) had significant negative impact on the performance of selected quoted firms in Nigeria. The study suggested amongst others that it is important for government to pursue genuine policy measures targeted at developing the security market to ensure high volume of corporate debt issue, liquidity of market and market efficiency in order to ensure smooth allocation and mobilization of funds to quoted firms in Nigeria.
Thesis Overview
Financial structure is financing decision undertaken by a firm in the course of funding its corporate investment. It entails the mixture of debt and equity capital to finance firm’s assets. The impact of financial structure has been inconclusive in literature. It is on the premise of the foregoing that the study sought to examine the impact of financial structure surrogate as short-term debt ratio, long-term debt ratio, stock/shareholders’ fund on performance of quoted firms in Nigeria (measured by return on asset). Panel data were collated from the published financial reports of ten firms over a six-year period ranging between 2011 and 2016. The data were subjected to pooled ordinary least square technique and Hausman tests. The Hausman tests indicated that random-effect model is more appropriate to estimate the four specified models. The results revealed that financial structure represented by short-term debt ratio (β=-0.21; p<0.05); long-term debt ratio (β=-0.33; p<0.05); stock/shareholders’ funds (β=-0.42; p<0.05) and short-term liabilities (β=-0.40; p<0.05) had significant negative impact on the performance of selected quoted firms in Nigeria. The study suggested amongst others that it is important for government to pursue genuine policy measures targeted at developing the security market to ensure high volume of corporate debt issue, liquidity of market and market efficiency in order to ensure smooth allocation and mobilization of funds to quoted firms in Nigeria.
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